Why must an immunized portfolio be rebalanced periodically?
Answer to relevant QuestionsWhat are the risks associated with a bond immunization strategy? Why is the funding gap of a defined benefit pensionplan referred to as the “unfunded liabilities”? “By hedging a defined benefit pension plan’sinterest-rate risk, a sponsor can eliminate pensionrisk.” Comment on this statement. Answer the below questions (a)What is the basic underlying principle in animmunization strategy? (b)Why might the matching of the maturity of acoupon bond to the remaining time to maturity of a liability fail to immunize a ...The Mercury Company is a fixed-income management firm that manages the funds of pension plan sponsors. For one of its clients it manages $200 million. The cash flow for this particular client’s portfolio for the past three ...
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